Look for Credentials in a Property Manager

Robert S. Griswold | Steven R. Kellman | Ted Smith
9-April-2000 Sunday

This column on issues confronting renters and landlords is written by Counselor of Real Estate and Certified Property Manager Robert Griswold, host of Real Estate Today! with Robert Griswold (10 a.m. Saturdays on AM1130 - KSDO radio, or on the Internet at www.retodayradio.com), and by attorneys Steven R. Kellman, director of the Tenants' Legal Center, and Ted Smith, principal in a law firm representing landlords.

Q: We own a condo in Santee. Soon we will be moving to Colorado and we want to have a management company handle our property.

How do we go about choosing a good company? What kind of questions do we ask? What can we expect for service? What is the usual charge? How can we keep from getting overcharged for maintenance?

A: Griswold -- You need to look for a company with credentials, references and a track record. There are several companies that manage individual condo units, but they are not all at the same level.

The problem with many of the firms is that they are either a part of (or closely connected to) a brokerage firm that really is only interested in your property management business today as a source of sales commissions in the near future.

I have even had letters to my column alleging that some firms do a mediocre job and then contact the owner and suggest they should sell now since the property is such a headache. Also, typically the competency of real estate sales firms with in-house management operations is very poor.

You want to look for a company that has credentials. I firmly believe that the top credentials in real estate management are earned from the Institute of Real Estate Management (IREM) and they are the CPM (Certified Property Manager), ARM (Accredited Residential Manager) and the AMO (Accredited Management Organization).

Membership in the San Diego County Apartment Association (SDCAA) can also be a good indicator, but not in lieu of the other designations (as candidly the only requirement to belong to SDCAA is that your application check clears the bank).

They should also be licensed and you should also check with the California Department of Real Estate to make sure their license record is clean (http://www.dre.ca.gov to check license status online).

Another indicator is if the management fee is too good to be true. The legitimate firms charge 10 percent of the monthly rent collected. Other firms will compete on price since they cannot compete in other areas. Some are tricky and will quote a lower percentage but will charge it even if the unit is vacant or the tenant doesn't pay.

You should be sure that you only pay a percentage of the collected rent so the management firm is motivated to have a tenant who pays on time.

Also, most property management firms actually use a standardized management contract (California Association of Realtors) that provides that the management firm (not the owner) gets to keep the late charge and/or returned check charge. Most legitimate firms have eliminated this clause.

Again, this is ironic since it is the job of the property manager to screen the tenant and enforce the rent collection in a timely manner.

As far as duties (it varies, but):

Most firms will prepare the unit to rent, rent your condo (usually an extra fee or at least the out-of-pocket for ads, credit checks, etc.);

They will collect and deposit the rent, pay any bills (mortgage, taxes, insurance, association, water/sewer, gardener, pool, management, etc.);

Prepare a monthly financial statement, and make quarterly inspections (watch this area carefully as even some of the "legitimate firms" that charge 10 percent have a very poor "property manager to properties managed" ratio).

An engineer friend/client calculated that one of our competitors had over 125 single-family or condo properties per property manager; thus with an average of only 65 work days in a quarter, they were inspecting two properties per day along with all of their other duties.

Believe me it can't be done. You have hit on the other big scam in rental housing management -- maintenance. Most firms low-ball the management fee (7 percent, 8 percent or 9 percent) and they make it up on markups on maintenance. This includes high markups on labor (pay the maintenance person $10 per hour, but charge you $25) and materials -- 20 percent to 50 percent more than you could get yourself at Home Depot.

The only way I know to keep from getting overcharged in this area is to do it yourself (only feasible if you are in the area, and then why would you need the property manager) or hire a firm that does not mark up labor or materials.

A lack of interest

Q: We're renting out a home and the new tenant wants to get interest on his security deposit. The standard rental agreement we signed with him specifically states he is not entitled to receive any interest on it, but he feels entitled to it anyway, claiming he's always received it from other landlords. We don't want to give it to him, but he wants a good reason as to why he shouldn't get it. Can you please give us one?

A: Griswold -- The first reason is that (unless you are in a rent control area) there is no legal requirement to pay interest. The second reason is the amount of interest is minimal.

I don't know about you, but I cannot generate more than 1 percent to 2 percent on small amounts of liquid funds in a checking account or passbook savings account. Based on my experience, the average tenant stays less than one year. Thus, the interest earned is nominal. The typical security deposit is relatively small, too. With the typical $500 security deposit, the interest would only be $5 to $10 in a year. These are the best reasons I know.

Of course, there is no law that says you cannot pay interest on their deposit. Thus, if this is a really desirable tenant (who treats the property well, is going to stay for an extended term, and has paid a very large deposit), then maybe you want to offer them a flat amount at the end of each year in lieu of interest as an incentive.

It should also be tied to certain criteria such as they must be current with all rent, have paid on time throughout the year, have caused or allowed no damage to your property, etc. This could be a win-win situation.

On call, all the time

Q: What rights does the landlord have when selling my currently leased residence? Do I have to have a lockbox? How available must I be to show my place, and with how much notice?

My lease states that all reasonable efforts to help sell the place must be made, but that is unclear to me. The real estate agent wants me to be available every day for eight hours (with only two hours notice to show), or have a lockbox, which I am refusing at this point.

A: Smith -- California landlords have the right to enter a rental property to show it to prospective buyers, lenders and renters. California Civil Code section 1954 offers some hints and guidelines on how and when entries are to be made.

Reasonable advance notice is required -- 24 hours is presumed to be reasonable. Any entry must be made during normal business hours. There is nothing per se illegal about installing a lockbox.

Your landlord has the right to have subagents show the unit. Authority to enter does not have to be written into the lease. Requiring your presence for eight hours is too much. Two hours' notice is probably stretching it. I think four to 12 hours' notice is more reasonable.

Your presence during the entry is not legally required. If you refuse to allow access, you could be responsible for damages to the landlord if he loses the buyer.

Try to compromise. Come up with mutually agreeable days and times. That way, everyone will avoid litigation.

Kellman -- California tenants have the right to privacy regardless of what your lease or the real estate agent says. The law states that any lease provision limiting your rights granted by the entry protection law (Civil Code 1954) is not valid, even if you signed it.

That law allows the landlord access to the rental for permissible reasons with reasonable notice if made during normal business hours. "Normal business hours" however, may exclude Sundays, which is usually a big day for real estate agents.

Twenty-four hours is considered reasonable notice (except in emergencies) unless your situation says that more notice is needed. A tenant can refuse an intended entry requested to be made in 24 hours as long as there is a good reason to do so.

You should, however, be ready to offer an alternate time to allow access to the rental since you do need to cooperate with lawful entry requests. You can, however, safely refuse to honor the real estate agent's request to be available daily with only two hour-notice to show the place since that goes way beyond their legal rights to show the place.

Rather than simply refusing their requests for excessive access to the rental, you may wish to offer to be available for such showings for reasonable compensation, like a rent discount. Lockboxes are not directly addressed in the law, but if such a device causes the violation of your privacy rights, you can demand its removal.

IF YOU'RE A TENANT OR LANDLORD, the authors stand ready to answer your questions in this column, although letters cannot be answered individually. Write them at: Rental Roundtable, Homes Section, San Diego Union-Tribune, P.O. Box 120191, San Diego, CA, 92112-0191. Or you may e-mail them at rgriswold.sdut@retodayradio.com

Copyright Union-Tribune Publishing Co.

Back to 2000 Rental Roundtable Index

Robert Griswold and the Real Estate Today! radio show strongly support the intent and the letter of all federal and state fair housing laws. As a reminder to all owners and managers of real estate, note that all real estate advertised is subject to the Federal Fair Housing Act, which makes it illegal to advertise "any preference, limitation, discrimination because of race, color, national origin or ancestry, religion, sex, physical disability, or familial status, or intention to make any such preference, limitation or discrimination." Additional state and/or local fair housing laws may also apply. Be sure to inform all persons that all dwellings offered or advertised are on an equal opportunity basis.

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Revised and Updated - Wednesday, April 26, 2006

Robert S. Griswold, CRE, CPM, CCIM, PCAM, GRI, ARM
Griswold Corporate Center
Griswold Real Estate Management, Inc.
5703 Oberlin Drive, Suite 300
San Diego, CA 92121-1743
Phone: (858) 597-6100
Fax: (858) 597-6161
Email: rgriswold.ret@retodayradio.com